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(1986); Donahue v. Commissioner, T.C. Memo. 1991-181, affd.
without published opinion 959 F.2d 234 (6th Cir. 1992), affd. sub
nom. Pasternak v. Commissioner, 990 F.2d 893 (6th Cir. 1993).
We held in Provizer v. Commissioner, supra, that each
Sentinel EPE recycler had a fair market value not in excess of
$50,000. Our finding in the Provizer case that the Sentinel EPE
recyclers had been overvalued was integral to and inseparable
from our finding of a lack of economic substance. Petitioners
conceded that the Northeast transaction was similar to the
Clearwater transaction described in Provizer v. Commissioner,
supra, and that the Northeast transaction lacked economic
substance. Given those concessions, and the fact that the record
here plainly shows that the overvaluation of the recyclers was
the principal reason for the disallowance and concession of the
investment tax credits, we conclude that the deficiency caused by
the disallowance of the investment credits was attributable to
the overvaluation of the Sentinel EPE recyclers.
Finally, we consider petitioners' express argument as to
waiver of the penalty. At trial and on brief, petitioners
contested imposition of the section 6659 addition to tax on the
grounds that respondent erroneously failed to waive the penalty.
Section 6659(e) authorizes respondent to waive all or part of the
addition to tax for valuation overstatements if taxpayers
establish that there was a reasonable basis for the adjusted
bases or valuations claimed on the returns and that such claims
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